According to Jean-Pierre Audoux, Delegate-General of the French Railway Industries Association (FIF), the new BASLE III international banking standards could well precipitate a damaging credit crunch. This is extremely bad news indeed for Snit-sponsored railway projects and for an industry whose prospects are dimming  once again.

The horizon for the railway industrial sector is clouding-over, at least on the French market, for as pointed-out by   FIF Delegate –General  Jean-Pierre Audoux,  negative signals will start piling-up come early 2012 with order-books drying-up virtually completely in 2016. Already today, a critical decision might well change the equation for project funding as a consequence of the   Basel III banking-sector reform which the FIF Delegate-General aptly compares to a   “genuine tsunami ". The underpinning principle of  this reform is the consolidation of  the level and quality of the reserve fund of banks, which in the words of Jean-Pierre Audoux risks having the adverse  effect «of requiring the major French banks to treble their capital stock by 2016,which in turn could well lead them into prioritising  short-term lending policies and precipitate a credit-crunch crisis, and this at the very time when the railway component of the Snit-sponsored package (representing € 100 billion worth of investments excluding the Outer Paris area) is supposedly to be funded  by taxpayers other than the State or Local Authorities to the tune of 80%….” In other words through Public-Private Partnerships in which Western Banks will be increasingly reluctant to involve themselves!

As a result, not only are all major projects jeopardised but, more worryingly still, rolling-stock orders are fast drying-up. The picture is as follows, sector by sector.

• Tramways. Urban-transit rolling stock, although not spared by the crisis, is by no means the worst-impacted sector and, to quote the Delegate-General,«… is the least threatened of all the activities…which incidentally are all threatened”.

• Rail freight. Here the facts speak for themselves, and « the cupboards will soon be  bare » . Once the last batch of Alstom-Siemens locomotives  is delivered in 2011, what next? Nobody   knows…   .

• Territorial coverage trains (TET). The State has pledged to inject € 300 million for   Teoz, Lunéa and Corail rolling-stock rehabilitation, but this budget will be dedicated to SNCF, in other words  to its workshops primarily…”. "The spinoffs for private-sector companies will therefore be minimal » bemoans Jean-Pierre Audoux, who goes on to question whether «….the State, after unveiling a major fleet-renewal initiative as from 2014-2015 representing € one billion minimum, will actually be able to finance the investment effort given the prevailing economic crisis”.

• TER rolling stock. The two train models ordered: Regiolis sets from Alstom and Bi-level sets from Bombardier, were expected to represent some 1860 coaches (including options) , a volume already deemed most optimistic when the contract was first signed. Indeed our scepticism has since been confirmed, with only 260 vehicles have been ordered to date. This is a major source of concern for manufacturers who, as pointed out by Jean-Pierre Audoux,      “are tooled to handle larger volumes, with the breakeven point located somewhere between 400 and 500 units for each model”. It is hard to see how the Regions could afford to order many more units now that they are deprived of valuable income following abolition of  the business tax by Government.

• TGV. The State has come down in favour of RFF by opting to raise track usage fees massively over coming years, so causing SNCF to announce its intention to overhaul the current TGV business model, coupled with the threat to limit TGV service coverage to High-speed lines exclusively. If this logic were to be applied, a 300-strong TGV fleet would suffice, but will SNCF really implement its threat? That remains to be seen, but the train operator’s reaction should preferably be viewed as a potent argument advanced in a tight discussion with the Public Authorities. Yet the disturbing fact is that since delivery of the last TGV set in the batch built for the Rhine-Rhone high-speed line, no new order has been recorded and none is expected.

Conclusion : looking ahead to 2016, the FIF Delegate-General fears that train builders   “might well see a 25% to 33% reduction in their current turnover on the French domestic market”.This anything but positive prospect, much to the disquiet of Jean-Pierre Audoux,   «contrasts sharply with our collective resolve to develop the French railway industrial sector into one of the most dynamic in the world. »

F. O.